Eurostar Privatisation

[Manchester77]

Another of our state assets is put up for sale today; the treasurys 40% stake of Eurostar will be sold off today to help pay off the deficit.
http://www.bbc.co.uk/news/business-29588412

r Osborne added: "As part of our aim to achieve £20bn from assets sales by 2020, the sale proceeds would make an important contribution to the task of reducing the public sector debt."

But Mick Cash, general secretary of the RMT rail union, said the Eurostar sale could see more of the UK's railways in foreign hands.

"This compounds the issue of foreign ownership of Britain's railways as the French state has first refusal on our slice of the highly profitable Eurostar cake. The French and Belgians think we are insane knocking off such a valuable and strategic infrastructure asset," he said.

'Insane'
Mary Creagh MP, Labour's shadow transport secretary, said: "The National Audit Office should urgently conduct a value-for-money enquiry before this sale proceeds.

"We must ensure that taxpayers are not ripped off again by bungling ministers and poor financial advice from the City," she said.

Companies interested in purchasing the stake have until the end of this month to notify the Treasury.

The government said it expects to reach "definitive agreements" in the first quarter of 2015.

Eurostar began service in 1994 as a partnership between three railway companies: SNCF, SNCB and British Rail (subsequently LCR).

Since then, Eurostar has carried more than 145 million passengers, with more than 10 million in 2013 alone. Numbers have risen every year for the past 10.

In September 2010, it became a single, unified corporate entity owned by three shareholders: SNCF, SNCB and LCR.

In June this year the UK government's holding transferred from LCR to the Treasury.

Other possible asset sales include the government's stake in the uranium enrichment company URENCO, legacy Royal Mail pension assets and the government's student loan book.

The Treasury has decided against selling off the Royal Mint, principally because it would not raise enough money.

Typical Labour Party response, surely this demonstrates that they aren't the party of the left anymore since they've not actually said they're against it; they just want it sold off at a high price. Yet more proof are labour are more centre right than the traditional socialist party for the workers.

Isn't it good that they've decided not to sell off the royal mint - not because of its historical value and the fact it makes all coinage in circulation - but because it wouldn't give them enough money.

So as everything the government owns must be being scrutinised for sell off I wonder what else will come up: maybe the nuclear decommissioning agency (and so DRS)?

 

[mafeu]

I tend to think that surely the best course of action is driving profitability (for example new routes to compete against air). Soon there will be nothing left to sell off and therefore fewer sources of long term income.

 

[Clip]

Its not really raising that much money in the grand scheme of things but then again how much profit has it generated for the govt?

 

[DarloRich]

Whilst i agree with you nothing the labour Party say is going to change the view of the conservatives. They are going to sell come what may!

Getting the best possible price seems like the best Labour can push for. It should be a no brainer but going on, most recently, the Royal Mail sale it won’t be!

 

[Xenophon PCDGS]

Let us not forget what actions led to the "defecit" being the size of what it was, which needed addressing.

 

[gordonthemoron]

what are the odds on SNCF, Abellio or DB?

 

[DarloRich]

Let us not forget what actions led to the "defecit" being the size of what it was, which needed addressing.

Bailing out all of those decent banking chaps for their reckless cashino gambling with our money or giving the lowly paid a touch more in their weekly pay packet? My money is on the later

 

[Yew]

I wonder how many members of the Eton/Harrow alumnus, and friends of prominent conservatives will get rich off of this... After all, why keep profitable assets in state hands when you can sell them to your rich mates at a pittance?

 

[Clip]

I wonder how many members of the Eton/Harrow alumnus, and friends of prominent conservatives will get rich off of this... After all, why keep profitable assets in state hands when you can sell them to your rich mates at a pittance?

Hold on, how do you judge the value of 40% of Eurostar then?

What profit has been generated for the govt from its stake in it?

Why on earth should we actually hold a stake in it now anyway?

 

[Manchester77]

I tend to think that surely the best course of action is driving profitability (for example new routes to compete against air). Soon there will be nothing left to sell off and therefore fewer sources of long term income.

Exactly, privatisation is an inherently shortsighted thing to do because it ignores the long term nature of state assets.

Its not really raising that much money in the grand scheme of things but then again how much profit has it generated for the govt?

It generates around £10m per year for the governe,not at the moment but it's likely that that will steadily increase as destinations expand and more people use it as we've seen over the past few years.

Getting the best possible price seems like the best Labour can push for. It should be a no brainer but going on, most recently, the Royal Mail sale it won’t be!

Didn't a leading tory figure of the Thatcher era of privatisation say that a key feature of privatisation was the assets were under valued so that the privatisation couldn't be viewed as a failure.

Let us not forget what actions led to the "defecit" being the size of what it was, which needed addressing.

Yes but from a debt of £1.3tn £300m isn't going to make much of a difference, especially when you consider that trident costs us £2-2.6bn per year.

I wonder how many members of the Eton/Harrow alumnus, and friends of prominent conservatives will get rich off of this... After all, why keep profitable assets in state hands when you can sell them to your rich mates at a pittance?

I imagine there'll be a fair few waiting to get same £££ from it, after all why privatise something if you and your mates can't benefit?

Hold on, how do you judge the value of 40% of Eurostar then?

What profit has been generated for the govt from its stake in it?

Why on earth should we actually hold a stake in it now anyway?

I'm not sure, the treasury will have probably got someone in to value it though (hopefully not the same folk who valued the Royal Mail though!).

As I said at the top of my post its around £10m and is rising steadily.

Because the UK was one of the three countries which agreed to build and operate international services via the Chunnel. Why should France or Belgium have a stake in it?

 

[PaulJ]

It seems the government are to sell off the UK share of Eurostar for £300m to help reduce the deficit. Given that this amount represents only 1/5000 of the deficit, what do we think of this? Equally, my back of fag packet calculations suggest that if every basic rate taxpayer in the UK paid an additional 1% tax, the government would raise £10bn in a year. Am I missing something, or am I being naive in the extreme?

 

[Class377]

I don't want to pay an additional 1% tax.

I don't mind someone else having a stab at Eurostar.

 

[AeroSpace]

Worse, the £300m would be a one-off, whereas the £10bn could be raised each year.

 

[Peter Mugridge]

what are the odds on SNCF, Abellio or DB?

SNCF has stated they won't bid.

Which means they almost certainly will!

 

[Manchester77]

SNCF might not bid, but Keolis might

 

[Penmorfa]

Pure dogma

 

[ScotGG]

It'll do nothing for the deficit. At best a token gesture to show something being done but in reality almost certainly a sell off to connections in the city. Royal Mail privatisation was a shocker from start to finish with a strong hint of corruption - worth reading up on what happened to see how rotten it was.

£300m is chicken feed to a govt to will have a £110 billion deficit this year on an overall spending budget around £700 billion. If it wanted to reduce the deficit substantially it could build more houses so the housing benefit bill goes down from £25 billion a year, to give one example. That's risen £3 billion alone the past 3 years. The UK also managed to give £2-£3 billion more in foreign aid last year.

 

[Abpj17]

Politics aside, DB bidding for it might be good for connections to broader european destinations (above and beyond France)

 

[Xenophon PCDGS]

Bailing out all of those decent banking chaps for their reckless cashino gambling with our money or giving the lowly paid a touch more in their weekly pay packet? My money is on the later

I will re-phrase my question by asking who was the particular financial wizard of which political party who was in power for a long period of time whose "prudent" (now there's a clue) economic thinking and "financial hand on the economic tiller" led to the eventual financial fiasco.
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I wonder how many members of the Eton/Harrow alumnus, and friends of prominent conservatives will get rich off of this... After all, why keep profitable assets in state hands when you can sell them to your rich mates at a pittance?

On the other side of the coin, looking to keep the matter in railway hands and with what you say about "getting rich off this", it would seem a wonderful opportunity of the RMT union to obtain the 40% stake, as they will then have both a railway asset in their portfolio and the financial benefits that you make reference to that will help to swell the financial coffers of the union. Mick Cash would then have a surname to boast about.

 

[DarloRich]

I will re-phrase my question by asking who was the particular financial wizard of which political party who was in power for a long period of time whose "prudent" (now there's a clue) economic thinking and "financial hand on the economic tiller" led to the eventual financial fiasco

Which all seemed fine until we had to bail out those decent chaps in the city or face the whole economy going pop! But of course they were decent chaps with nice suits so it cant be their fault.

I know; let’s blame the poorest! Yes, that cleaner in the hospital on £15k a year is the culprit! Pip Pip old bean, pass the port etc

 

[Xenophon PCDGS]

Which all seemed fine until we had to bail out those decent chaps in the city or face the whole economy going pop! But of course they were decent chaps with nice suits so it cant be their fault.

I know; let’s blame the poorest! Yes, that cleaner in the hospital on £15k a year is the culprit! Pip Pip old bean, pass the port etc

Indeed, the "Champagne Socialists" did very well indeed under the person who no-one seems either to want to name or blame....

 

[Clip]

As I said at the top of my post its around £10m and is rising steadily.

Because the UK was one of the three countries which agreed to build and operate international services via the Chunnel. Why should France or Belgium have a stake in it?

Well depending on who you believe then the figures vary wildl;y - most generally put it wround £7 million but for some reason the TSSA seem to think it gave us £53 million in 2013...

Manuel Cortes, leader of the TSSA rail union, said selling the stake was "ideologically driven madness", adding: "Eurostar, like East Coast trains, makes money for the public purse and delivered £54 million in profits in 2013.

Yes it may grow more but just how much capacity is left going through the tunnel? And is that really enough profit to actually keep it?

 

[Xenophon PCDGS]

Well depending on who you believe then the figures vary wildl;y - most generally put it wround £7 million but for some reason the TSSA seem to think it gave us £53 million in 2013...

One can only hope that the TSSA do not use such "creative accounting" when it comes to the auditing of the financial position of their union.
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Yes but from a debt of £1.3tn, £300m isn't going to make much of a difference, especially when you consider that Trident costs us £2-2.6bn per year.

That matter of "£2-2.6bn annually" which you mention did not seem to bother "Prudence" Brown overmuch in all the many years that he was the Chancellor of the Exchequer.

 

[Peter Mugridge]

How would building more houses reduce the housing benefit bill?

The house prices are unlikely to reduce by enough to counter the cost of building the extra houses - what would be more effective, surely, would be the complete removal of all tax breaks on second homes and homes left empty?

 

[ainsworth74]

How would building more houses reduce the housing benefit bill?

The house prices are unlikely to reduce by enough to counter the cost of building the extra houses - what would be more effective, surely, would be the complete removal of all tax breaks on second homes and homes left empty?

Housing Benefit is only payable on rented accomodation not on mortgaged property. You can get help with mortgage payments as part of income based benefits but it will only help you to cover the costs of some of the interest.

The only way I can forsee building new houses would bring down the Housing Benefit bill would be if it also brought down the cost of rents at the same time. But building new houses for people to buy wouldn't do anything for the Housing Benefit bill.

 

[muz379]

That matter of "£2-2.6bn annually" which you mention did not seem to bother "Prudence" Brown overmuch in all the many years that he was the Chancellor of the Exchequer.

It didnt seem to bother all the tory boys in the city when they where making huge rakes of money off the back of selling dodgy debts for massive sums of money making themselves loads of money off it either .Or even worse massaging Libor to make themselves a few extra pennies

But then it all came crashing down around them and they pointed their fingers before the dust had even settled .

Personally I think it is a bit simplistic to blame just one man for something that was a global collapse triggered by sub prime lending . Im not for one minute saying that old Gordon can escape scott free but Is it not a bit unfair to pin all of the blame on just one man given what was happening in the city .

As for the LCR sell off . Well if it goes anything like the Royal mail sell off (and why wouldn't it ) then it will be a farce , be massively underestimated , loads of old etonians will make a fair bit of money from the sell off , Mr Osbourne will be forced to make a bumbling apology for undervaluing it and then we all just go our seperate ways until the next blue cross sale for the city boys .

I think the profit sounds a bit low at £7mil , my understanding was that last year Eurostar International Limited made £54Million , which with our 40% share would give us £21.6 million profit . And profits are going up 4% year on year so its not like we are jumping a sinking ship either .
To sell it off for something like 13 years worth of income from it seems a bit short sighted . But what do I know I dont have friends in the city who I have to keep on good terms with .

 

[LNW-GW Joint]

The most likely buyer is a pension fund (which might be British).
HS1 access rights (ie Eurostar/SET's path supplier) have already been sold to a Canadian pension firm (Ontario Teachers, which also owns Birmingham, Brussels and Copenhagen airports).
HS2 is also intended to head down this path when it is built.

It doesn't suit the government for Eurostar to be in the public sector.
Its competitors (BA, EasyJet, even Air France) are in the private sector.
It took a long time to make it profitable - it was a basket case for the first decade.

 

[Clip]

As for the LCR sell off . Well if it goes anything like the Royal mail sell off (and why wouldn't it ) then it will be a farce , be massively underestimated , loads of old etonians will make a fair bit of money from the sell off , Mr Osbourne will be forced to make a bumbling apology for undervaluing it and then we all just go our seperate ways until the next blue cross sale for the city boys .
.

Hmmm you say this but the share price has settled somewhat near where it was floated at so its not a fair comparison. It was always going to go high with speculators,erm, speculating and thats what pushed up the price.

people made a lot but given its price now there will be a fair few who lost a lot too.

 

[swt_passenger]

I notice someone has gone back and expanded "LCR" to London and Continental Railways in the thread title, but as it said in the BBC article, they are no longer involved in Eurostar. The UK shares in the company have been held directly by the treasury since June this year.

It was reported in Hansard as being to avoid a conflict of interests regarding the ECML franchise competition:

London and Continental Railways

The Secretary of State for Transport (Mr Patrick McLoughlin): I can today inform the House that the Department for Transport has transferred its 40% stake in Eurostar (held through London and Continental Railways) to Her Majesty’s Treasury.

This is to address any perceived or actual conflict of interests resulting from the interaction between the Government’s stake in Eurostar and the east coast franchise competition, and in particular any perception of bias arising out of the Secretary of State’s shareholding in London and Continental Railways.
http://www.publications.parliament.uk/pa/cm201415/cmhansrd/cm140619/wmstext/140619m0001.htm

LCR is now primarily a DfT owned property development company.

 

[muz379]

Hmmm you say this but the share price has settled somewhat near where it was floated at so its not a fair comparison. It was always going to go high with speculators,erm, speculating and thats what pushed up the price.

people made a lot but given its price now there will be a fair few who lost a lot too.

it did indeed go high ,Im not saying it was undervalued by the standard of the share price rocketing to 580p/share a few months after the sale as I understand it was bound to peak like that with investor excitement and initial demand etc but given that it was floated about a year ago at 330p/share a share and has now settled somewhere near the 400p/share mark it was still surely undervalued a bit ?

Given that at the time the government valued it at £3.3bn and some in the city said it was worth more like £4.5bn I think it is fair to say the government did undervalue their asset in the case of royal mail as proven by the fact that the share value has now settled nearer to the value the city placed on it than the one the government did .

We could of course argue all day about this matter I understand there are various different issues that where at play including the value of some or royal mails property and the issues surrounding the new regulatory regime they where operating under just prior to sale .

But the point I was trying to make is that the public will see the sell off of eurostar and immediately think about the royal mail sell off . Given that an opinion poll earlier this year said 66% of people thought royal mail was sold off too cheaply why should people have any confidence in the governments ability to sell off any more of our valuable assets ?